Winehole23
04-06-2021, 08:27 AM
British nonbank skirts financial fitness tests, receives emergency COVID dosh for banks.
The collapse of UK-based supply chain finance firm Greensill Capital continues to reverberate. In Germany the private banking association has paid out around €2.7 billion to more than 20,500 Greensill Bank customers as part of its deposit guarantee scheme after the bank collapsed in early March. But the deposits of institutional investors such as other financial institutions, investment firms, and local authorities are not covered. Fifty municipalities are believed to be nursing losses (https://www.reuters.com/article/us-britain-greensill-germany-savings-ana-idUSKBN2BN0R6) of at least €500 million.
Greensill’s biggest source of funds, Credit Suisse, has seen its share price plunge by almost a quarter. This is due not only to the fallout from Greensill’s collapse but also the impact of losses at its prime brokerage division caused by the stricken U.S. hedge fund Archegos, which are expected to reach €4 billion. The lender has warned of (https://www.reuters.com/article/us-britain-greensill-credit-suisse-exclu-idUSKBN2BH2A6) “considerable uncertainty” regarding the valuation of its supply chain finance fund. More than $5 billion of the roughly $10 billion invested in the fund remains outstanding.
Credit Suisse had assured clients in marketing documents that the debt in the supply chain fund was “low risk”. In one factsheet, it also said (https://www.reuters.com/article/us-britain-greensill-credit-suisse-insig-idUSKBN2BO4VP): “The underlying credit risk of the notes is fully insured by highly rated insurance companies.” At the beginning of March, that turned out not to be true. Some clients whose money remains trapped in the fund have threatened to sue.
Greensill’s biggest client, Anglo-Indian steel magnate Sanjeev Gupta, is on the verge of bankruptcy. Gupta’s GFG Alliance reportedly owes Greensill more than €3 billion. It began defaulting on its obligations after Greensill stopped lending to the group at the beginning of March. At the end of March Gupta requested a £170 million emergency loan from the UK government, which was duly rejected. Greensill’s administrator, Grant Thornton, has been unable to verify invoices (https://www.ft.com/content/fe234f59-75b9-44f7-af8a-f05e588957b7) underpinning some of the loans to Gupta. Companies listed on the documents denied ever having done business with the metals magnate.
Now the fallout is beginning to splatter the British government, which invited Greensill to participate in its Coronavirus Large Business Interruption Loan Scheme (CLBILS). This is despite the fact the company: a) wasn’t a bank; and b) was quite clearly already in deep financial trouble. Greensill’s participation in CLBILS allowed it to extend even more loans, this time government backed, to Gupta’s empire. Taxpayers will now probably end up holding the bag for those loans.
https://www.nakedcapitalism.com/2021/04/fallout-from-greensill-collapse-splatters-british-government.html
The collapse of UK-based supply chain finance firm Greensill Capital continues to reverberate. In Germany the private banking association has paid out around €2.7 billion to more than 20,500 Greensill Bank customers as part of its deposit guarantee scheme after the bank collapsed in early March. But the deposits of institutional investors such as other financial institutions, investment firms, and local authorities are not covered. Fifty municipalities are believed to be nursing losses (https://www.reuters.com/article/us-britain-greensill-germany-savings-ana-idUSKBN2BN0R6) of at least €500 million.
Greensill’s biggest source of funds, Credit Suisse, has seen its share price plunge by almost a quarter. This is due not only to the fallout from Greensill’s collapse but also the impact of losses at its prime brokerage division caused by the stricken U.S. hedge fund Archegos, which are expected to reach €4 billion. The lender has warned of (https://www.reuters.com/article/us-britain-greensill-credit-suisse-exclu-idUSKBN2BH2A6) “considerable uncertainty” regarding the valuation of its supply chain finance fund. More than $5 billion of the roughly $10 billion invested in the fund remains outstanding.
Credit Suisse had assured clients in marketing documents that the debt in the supply chain fund was “low risk”. In one factsheet, it also said (https://www.reuters.com/article/us-britain-greensill-credit-suisse-insig-idUSKBN2BO4VP): “The underlying credit risk of the notes is fully insured by highly rated insurance companies.” At the beginning of March, that turned out not to be true. Some clients whose money remains trapped in the fund have threatened to sue.
Greensill’s biggest client, Anglo-Indian steel magnate Sanjeev Gupta, is on the verge of bankruptcy. Gupta’s GFG Alliance reportedly owes Greensill more than €3 billion. It began defaulting on its obligations after Greensill stopped lending to the group at the beginning of March. At the end of March Gupta requested a £170 million emergency loan from the UK government, which was duly rejected. Greensill’s administrator, Grant Thornton, has been unable to verify invoices (https://www.ft.com/content/fe234f59-75b9-44f7-af8a-f05e588957b7) underpinning some of the loans to Gupta. Companies listed on the documents denied ever having done business with the metals magnate.
Now the fallout is beginning to splatter the British government, which invited Greensill to participate in its Coronavirus Large Business Interruption Loan Scheme (CLBILS). This is despite the fact the company: a) wasn’t a bank; and b) was quite clearly already in deep financial trouble. Greensill’s participation in CLBILS allowed it to extend even more loans, this time government backed, to Gupta’s empire. Taxpayers will now probably end up holding the bag for those loans.
https://www.nakedcapitalism.com/2021/04/fallout-from-greensill-collapse-splatters-british-government.html